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Should your business increase its prices?

August 07, 2014 by Guest contributor

Should your business increase its prices?{{}}It is only natural to try to compete on price. But what you’re telling customers is “buy from me because I’m cheaper”, when what you should really be saying is “buy from me because my product meets your needs at an affordable price”.

Where does this tendency come from? Price is very rarely the primary motivator. What tends to happen is once someone has decided to buy from you they just want to pay a bit less. It makes them feel like they got a bargain. How often have you thought to yourself: "I will only buy this product if it is at this price"? Maybe at an auction, but you wouldn’t think this way when making daily purchasing decisions.  

There have been many studies showing that a small proportion of customers buy on price and the rest for a multitude of other factors. If price was the primary motivator there would be no luxury items. Luxury items sell for high prices because they are seen as exclusive, high quality and, of course, they make the buyer feel good about themselves.

The key is to make sure that your product is unique. So why is it that some sales people are against raising prices?

1 “They go against industry prices”

Some will say: "Nobody in this market will pay that sort of price!" Alas, if the product is worth it, customers will. Many successful entrepreneurs have created extra value or new products in their industry for their customers and have charged a higher price.

A classic example is the Dyson vacuum. When the first Dyson came out in the mid-1990s it sold for £400. In today's money that is £600 at least. Yet they were snapped up and made Dyson a fortune. Why did it sell? It was different and made people feel good about themselves. A boring household appliance has been turned into something a bit cool, trendy and exclusive - a bit like Apple did with the home computer.

2 “I can’t sell expensive products”

So many sales people complain that the service or product they are selling is too expensive, but they forget that others in their team are not having any problems.

3 “It’s wrong to charge a high price”

Remember the “bitterness of low quality lasts longer than the sweetness of low price”. If you put up your prices, you will always lose some customers, but only those who have bought solely on price. So what? Isn’t it better to have a higher proportion of customers who actually value your products or your services and are prepared to pay for them? Obviously, charging more money brings in more capital, which enables you to invest more into your business. It can also allow you to cut costs as in some ways fewer customers paying more are likely to use up less of your time complaining!

How do you raise prices? 

It’s probably best that you do not set your own prices. The best person for the job is your customer. Ask them what they like and don't like about your products or services. Listen to what they say and focus on improving the negatives. Test everything and raise your prices by a minimum of 5% and perhaps a maximum of 20% on your existing offerings.

If you raise prices, make sure you have a plan. Try a few customers and see what their reaction is. Give them plenty of warning, because no one likes a surprise increase. If you lose too many, keep monitoring and adjust if necessary. Can you start charging for products or services that have previously been free?  Almost always free stuff isn’t as great as paid-for services and customers often expect this.

Where have I seen this before?

When I was selling information about businesses for sale, the yearly subscription was £165. This had not changed in many years. Our sales were good, but we decided to put up the price to £195 and this made no difference to our monthly figures of c.100 new subscriptions a month. In fact – it went up.

Three months later we put the price up to £225 a subscription. Sales levelled off, but our margin was up significantly. Our closest competitor was offering a similar and in our view inferior product at £99 a month. When the Credit Crunch hit, we lowered it back down to £195, but never back to £165. It turns out that my co-director just felt uncomfortable charging more than £200! People deemed the product to be worth it and in the end, it helped us to drive more innovation like e-books, additional products and a better website experience.

One computer consultant I’ve hired in the past was charging £35 per hour. I knew this was far too low but didn’t let on, of course. They decided to later raise the price to £45 per hour but this made no difference to me. I am actually happier because I am confident they will deliver an even better service.

Copyright © 2014 Robert Moore of KSA Group and www.companyrescue.co.uk

Further reading

What Steve Jobs taught us about not listening to his customers

August 04, 2014 by Guest contributor

What Steve Jobs taught us about not listening to his customers{{}}Steve Jobs famously said that he didn’t need to listen to his customers, because they don’t know what they wanted yet. Technology entrepreneur Alan Kay is also quoted as saying: "The best way to predict the future is to invent it”.

In a 2012 report in the Harvard Business Review, Mario D’Amico, senior VP of marketing at Cirque du Soleil, said: “Customers don’t know what they want until they see it. You can’t rely on them to decide what your next product will be.”

Is this true? Should we listen to customers or is sticking to our guns the best way to succeed?

Market research

Studies have shown that most innovative ideas come when we work alone. It can be tempting to follow your market research and adapt your original ideas to better fit the market. However, this can be problematic, because you risk losing sense of your original product and take away that which sets it apart from other products.

Apple has been a market leader for decades and has put innovation and uniqueness at the forefront of its product releases. However, Apple has gained many loyal followers and is seen as a desirable luxury brand with stylish and ‘on-trend’ products, so there isn’t too much risk when releasing a product following little market research and trials.

Cirque du Soleil is a performance art company that has always been unlike anything else, known worldwide for its creativity. Therefore, it does not rely on customer feedback – its popularity is based on its uniqueness.

It is likely that your business is unlike either of these and therefore, although their advice is based on years of experience and success, it should be taken with a pinch of salt.

So, what we can learn from Steve Jobs is…

  • Listen to your customers, but in areas of customer satisfaction and feedback.
  • If you have a great idea, release it! Don’t be put off by market research if you believe it will sell.
  • Take in mind some reports, however, it needs to be saleable and profitable.
  • Retain the product’s original qualities and uniqueness – make it stand out.
  • Not every business is going to be like Apple or Cirque du Soleil. Innovative and unique products may not work for every business. Consider what kind of business you are and who you want to be.

Copyright © 2014 Natalie Naik for Miss Macaroon

Further reading

Getting your team to trust you

July 31, 2014 by Guest contributor

Getting your team to trust you{{}}In the old days of business, a manager would command and control. He (it was usually a he) didn’t need to worry about building trust. However, today, leaders who want to drive their business forward use more sophisticated and modern methods. 

In 1990, Joseph Nye of Harvard developed the concept of ‘Soft Power’. It’s a method of persuasion that involves attracting and co-opting people, instead of coercing, using force or giving money. If you want to become a successful leader, you need to display successful powers of persuasion, and high levels of emotional intelligence. How do you do this?  The answer lies in getting your team to trust you.

1 Be genuine

There is a strong temptation, when you admire others, to imitate aspects of their personality. However well intentioned this is, your team will sense the falseness. Always be genuine. Have faith in your abilities. Without this foundation, anything else you do will be doomed to fail.

2 Show vulnerability

Everybody wants bosses to be strong and capable. You need to be able to find solutions when things get really tricky – and your shoulders need to be broad when big problems arise.

Interestingly, though, if you never show your vulnerabilities, you could forever be regarded as unapproachable and it’s difficult to build trust from such a position.

It means occasionally confiding in one or more of your team that you, too, find a particular task stressful or that you have to work hard at something to get it right. This helps people to see you not just as their boss, but also as a fellow human being with whom they can have a genuine working relationship.

3 Know yourself

How many times have you given feedback to people who have been genuinely shocked? It’s often difficult to see oneself as others do. However, the more you can see yourself objectively, the better placed you are to work on areas that might be blocking your ability to build trust.

The useful personal development technique – 360-degree feedback – is an ideal tool for this. You and your team evaluate your behaviour. You then receive a report showing the difference between how you perceive yourself and how others do. It’s a remarkably easy and powerful way of identifying where to start on self-development, to make yourself more easily trusted.

4 Give genuine feedback

The problem with giving feedback is that it’s often negative, dealing with areas for improvement. As a result, managers either don’t give feedback or (trying to be kind) give it in such a saccharine way that it’s useless. This inevitably causes mistrust, because your team members want to improve. They know they’re not perfect and they want to improve so they can enjoy promotions and increased pay.

Happily, there’s a straightforward solution. Firstly, you need to realise that the kind thing to do is to give the feedback, not hold on to it. Secondly, give feedback in a way that is received well. There are numerous techniques you could adopt, but the role of ‘framing’ is essential. By using framing, you can make it very clear that your intention is to help your employee. You ask their permission to do so. With this established, you can go on to give candid feedback. Your team members will know that you can be trusted to tell it as it is.

5 Tell the truth

Finally, always tell the truth. This doesn’t mean disclosing confidential information, nor does it mean volunteering information that could damage morale. It does mean, though, that you need the courage to say ‘I’m sorry, I can’t tell you that’ or ‘this is how it is, and this is how I’m going to help you’. The moment your team suspect you are being dishonest, you’ve lost them forever. If you tell them the truth at the right time, in the right way, you will earn their trust and their respect.

Trust takes a long time to build, but a very short time to lose. Despite the considerable investment needed to earn trust, it’s worth the effort!

Copyright © 2014 Heather Foley, consultant at HR technology and software provider etsplc.com

Further reading

What's the point of startup accelerators?

July 28, 2014 by Guest contributor

What’s the point of startup accelerators?{{}}It’s accelerator season again and applications are being accepted for mentoring from TechStars London, Oxygen Accelerator, Dotforge and more. Lots of entrepreneurs and investors see accelerators as a vital part of starting a tech company – but are they really for everybody and do you really need to attend one?

What is an accelerator?

Most UK startup accelerators work in the same way: they’re three-month programmes for your startup that feel a bit like going back to school.

Simon Jenner, CEO of Oxygen Accelerator, the accelerator I attended, explains: “Launching a startup is hard work. All an accelerator does is concentrates that hard work and surrounds founders with people who have vested interests in making their startups succeed. Entrepreneurs who like being challenged will exceed all their expectations and thrive in an accelerator.”

Beans on toast

Most startups enter an accelerator programme to get funding. All accelerators culminate in a demo day, where founders pitch their creations to a room full of investors, vying for any form of interest that could turn into a coffee, chat and maybe a nice, fat cheque.

But don’t join an accelerator for the money. The purpose of the small investment is to simply keep you alive for the three months of the programme.

Take a long hard look in the mirror. Decide if you want to put yourself through something like this. You better get used to having beans on toast for dinner or making big cheap meals that’ll last you all week. And say goodbye to spending a small fortune on a night out. You need to live cheaply and healthily and work as hard as possible.

How it works

Most accelerators are split into three phases:

1 Death by mentor: This is the most mentally grueling thing I’ve ever done. In less than two weeks I met more than 100 mentors for 30-minute one-to-one sessions. Some will tell you you’ll go bust in a week, others will be more positive. Take the criticism well and spot the trends.

2 Build, build, build: You can’t build anything during phase one, and you now have fewer than 10 weeks until demo day, so it’s time to launch, iterate, learn and repeat.

3 Sell, sell, sell: Time to segment your team, with one person focusing on building relationships with investors, and the rest trying to make the damn thing make money.

The smooth with the rough

Deciding whether or not to go to an accelerator is down to you. On the plus side, accelerators put you and your business in an environment that will help it thrive, surrounded by experts who’ve been there. And there’s a chance you’ll secure investment.

On the downside, you will be criticised repeatedly, you won’t have a social life and it’s tough financially. For every Buffer, TaskRabbit or Dropbox there are probably more than 50 successful startups that didn’t graduate from accelerators, such as Facebook, Twitter and Huddle (and they’ve not done too badly).

If you think you’ll get value from an accelerator and know what you’ll face, you should at least apply for one – what’s the worst that could happen?

© James Pursey. You can tweet him on @JamesPursey if you’d like to know about how he’s putting his experience from Oxygen Accelerator into practice at carwow.

Further reading

Why you sometimes have to reinvent yourself if your business is to stay alive

July 23, 2014 by Robert Craven

Why you sometimes have to reinvent yourself if your business is to stay alive{{}}Three brief case studies. Three businesses that had to ‘wake up and smell the coffee’, or go bust! Knowing what to do is not the same as taking the necessary action.

To turn around their fortunes, three separate magazine publishers became obsessed with the triad of strategy, marketing and teams.

All the publishers had made their money from subscriptions and sales revenues. Both of these revenue streams fell by about 70% in 2009. The entire landscape of their very different markets and industries had changed.

The solution was to reinvent the businesses. One used its incredible database to run conferences; one contracted by 70% and only kept its premium high-value work while slashing costs; one reinvented itself by focusing on editorial and content relevant for a very specific age range.

All three businesses became more profitable than they were when they hit their respective brick walls.

The moral of the story: sometimes you have to reinvent yourself. There is no other choice. Death by a thousand cuts is not a pleasant way to die.

Copyright © 2014 Robert Craven, business coach and consultant, and author of Kick-Start Your Business and Grow Your Service Firm. Robert also runs The Directors’ Centre, which helps businesses to grow. Watch a five-minute video of Robert live at PSA London.

10 tips to help entrepreneurs implement effectively

July 21, 2014 by Guest contributor

10 tips to help entrepreneurs implement effectively{{}}Ideas mean nothing unless you make them real. Real entrepreneurial ideas get turned into products and services and are sold to customers to make a difference. Yet, entrepreneurs are often not implementers, nor project managers. They’re often distracted by the next idea, development or new opportunity. Here are my 10 tips for entrepreneurs on how to become a better implementer…

1 Clarity on where you’re going

Firstly, have clear goals. If you can’t tell everyone what you are doing, quickly and with passion, why would they care about it? If the picture you paint is of a future that makes the effort worthwhile, people will yearn for it and fight for it, with you.

2 Slow down to go faster

There is the work that directly creates our idea and makes it real, and then there is the planning and administrative work. That indirect work is an ‘overhead’. Many entrepreneurs treat overhead tasks as something to do as you go. However, by doing them early you’ll save a lot of time later.

3 Set a realistic timescale

You’ll need some time to adapt and change on the journey. Work expands to fit the time available too, so be realistic when setting the goal. If there are critical dates you need to hit, those should be clear at this point, so expectations are properly set.

4 Find the big chunks

Look at the work one quarter at a time. Identify what would have had to have been delivered three months before the end date, six months before the end date and so on. By doing that your team can see what they’ll be building.

5 Identify the building blocks

Now create monthly goals for the next two quarters and weekly goals for the first month or so. But do not go further. Great teams rely on the ability of everyone to plan their own work within the framework.

6 Identify “Now Wins”

It’s now useful to plan forward and look at what could be done this week, this month and this quarter. This can show you where there are opportunities to win now and get ahead of the game.

7 Don’t be a slave to the plan – the plan is your slave

If necessary – take a step back. Do some work on the project, deliver some elements of it and then look at where that takes you and how to plan further from there. Project planning should be no more than a few minutes each week, once the original plan is put in place.

8 Remember resources and materials

In any project there will be times when you need specific essential materials or resources, so each week and month take a look ahead, check what resources you’re expecting to need and make sure they’re on track for delivery.

9 Reward success

It’s important to recognise and reward incremental successes within the team. Let them know that it’s on track and going well. It will help ensure that this and every implementation easier.

10 Document along the way

In reality, every task in a project has probably been done before in a different context. The mistakes have been forgotten, making them easy to repeat, with shortcuts forgotten, too. This step is not for this time, it’s for next time. You’ll get quicker and can move on to the next idea ever faster.

Implementation brings your ideas to the world and when it’s done brilliantly it’s because of attention to detail and great planning. It builds on past experience and creates the foundations for future success. Brilliant products and remarkable companies implement brilliantly.

Copyright © 2014 William Buist, owner of Abelard Collaborative Consultancy and founder of the exclusive xTEN Club, an annual programme of strategic activities for small, exclusive groups of business owners.

Further reading

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